Consumer Checkpoint: Are American Households Starting to Pull Back?
Insights from Bank of America’s July 2025 Report on U.S. Household Spending Trends
As the summer heats up, so does the uncertainty around U.S. consumer behavior. The latest Consumer Checkpoint from Bank of America Institute gives us a granular view into how different income groups are navigating inflation, interest rates, and a cooling job market. Here's what stood out:
🔍 Key Insights
📉 Spending Is Slowing
Total card spending per household grew just +0.2% YoY in June—down from +0.8% in May.
A small +0.3% MoM rebound barely offset declines from April and May.
🛍️ Retail Up, Services Down
Retail spending rose +0.7% MoM, thanks to grocery, gas, and clothing.
But services spending declined for the 3rd straight month, last seen in 2008.
🧳 Discretionary Cuts Start With Travel
Travel and tourism are seeing the biggest pullbacks.
Meanwhile, households are still spending freely at restaurants and on electronics.
💸 Lower-Income Households Are Struggling
Their card spending fell –0.2% YoY, the first drop in over a year.
Wage growth for this group slowed to +1.6%, vs. +2.9% for higher earners.
📉 Labor Market Perceptions Are Fading
Job openings are easing, and fewer people believe jobs are “plentiful.”
Younger, lower-income consumers (especially Gen Z) are the most cautious.
🛒 Trading Down Supports Spending—for Now
Lower gas prices and value shopping at grocery stores are giving budgets some breathing room.
But if gas rebounds or inflation returns, the cracks could widen fast.
🔮 Outlook: Early Signals, Not Yet a Spiral
While there’s no mass retrenchment—yet—the divide is growing. Higher-income households are still spending. But lower-income Americans are making harder choices, and that’s where early cracks tend to appear.
If gas prices rise or the labor market deteriorates further, the risk of broader pullback grows.